Jimmy Aki
The financial market is boiling from news of Silicon Valley Bank’s collapse. The US stock market has been trading lower by 4.28% in the past 48 hours following SVB’s financial crisis unfolding.
However, crypto may end up the winner in all this once the dust settles.
SVB Hits Rock Bottom, Pulling Many Along With It
Silicon Vally Bank officially shuttered its business on Friday after filing for voluntary liquidation of its assets. According to reports, the California-based tech lender was put into receivership by banking regulators in the region, with its office headquarters closed down by federal regulators.
The contagion has since begun to spread like a cancerous cell, with many tech startups with funds in SVB seeing their funds frozen.
Rebundle’s Ciara May recently told TechCrunch that her funds were inaccessible.
According to May, reports reaching her indicate that the company may be unable to access funds above the Federal Deposit Insurance Corporation (FDIC) specification of $250,000.
Rebundle is not the only one caught out in the cold. Networking app Kabila’s founder James Oliver has also bemoaned the SVB withdrawal crisis, pointing out that the company’s inability to access its funds could lead to issues in fulfilling employee payroll demands.
Oliver said all the company’s funds are locked up in SVB, and if its holdings cannot be accessed, it may force them to close down.
This does not stop here, however. A similar TechCrunch report states that over 60 Indian tech startups have more than $250,000 FDIC cover stuck in SVB.
Furthermore, 24 of these startups have more than $1 million in the hands of the embattled tech lender.
Meanwhile, developing reports also point out that several crypto-focused companies have lost access to their funds of hundreds of millions of dollars.
According to a recent Twitter thread, Circle makers of the popular stablecoin USDC have over $3.3 billion locked in SVB. The company confirmed the news in the early hours of today.
2/ Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow guidance provided by state and Federal regulators.
— Circle (@circle) March 11, 2023
BlockFi, another crypto native project, is also locked in the SVB debacle after enduring a tough face-off with federal regulators for much of 2022 for its security-like products.
According to a recent filing posted on Twitter, BlockFi has up to $227 million in uninsured funds in the tech startup lender’s account.
Per new bankruptcy filing, BlockFi has $227m in Silicon Valley Bank. The bankruptcy trustee warned them on Mon that bc those funds are in a money market mutual fund, they’re not FDIC secured — which could be a prblm w/ keeping in compliance of bankruptcy law pic.twitter.com/hnpo8anrrS
— Lauren Hirsch (@LaurenSHirsch) March 10, 2023
This shows a spiraling contagion of centralized entities rapidly collapsing under the weight of financial mismanagement.
Bitcoin’s Growing Utility Imminent
SVB’s collapse has been termed the biggest financial crisis by a financial institution since the 2008 global recession. With this, both the broader financial market, traditional and crypto, have since seen most of their gains shaved off in the aftermath of the bank’s closure.
Focusing on the crypto market, the digital asset ecosystem has lost over 7% and dropped off its $1 trillion market cap perch.
However, all is not lost as it better points to the original narrative of not trusting centralized entities popularized by Bitcoin founder Satoshi Nakamoto.
The foremost asset may be performing badly in the contagion, but digital asset holders have one unique benefit over those who rely on centralized entities – they have unrestricted access to their funds anytime and anywhere they want.
Putting money in the bank may make sense in the traditional space, but a growing fallout is already beating the drum for Bitcoin to eventually replace fiat as the better store of value for investors.
This way, users can transact in a sanction-free and cost-effective manner without having to rush to place a withdrawal order whenever a bank implodes.
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This article was written for Business 2 Community by Jimmy Aki.
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